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Friday, January 28, 2011

Karl du Fresne: Perhaps we'll all be too drunk to notice

In every glossy magazine I open – and in newspapers, to a lesser extent – page after page is devoted to the pursuit of pleasure in one form or another. We are endlessly absorbed with food, fashion, travel, design and other trappings of an affluent, self-indulgent lifestyle.
A visitor from another planet could be excused for thinking we are a prosperous country with so much money at our disposal that we have no concerns more pressing than where to go for our next overseas holiday, which trendy architect to engage for our new beach house or what $50 bottle of Central Otago pinot noir to drink with our Moroccan lamb tagine.

Something is seriously out of kilter here. Our preoccupation with the good life is completely out of line with economic reality. As a nation, we seem far more interested in consuming than producing.

I don’t want to sound like a killjoy, but New Zealanders are living in a dream world. Economically speaking, the country is in a bad way. We have gone from being one of the richest countries in the OECD in the 1960s, when we had strong export-led growth, to one of the poorest.

The best analogy I can think of is a cruise ship on a very long voyage. Once a stylish liner, the envy of other fleets, it set out from port under brilliant skies with flags fluttering gaily, bands playing and paintwork gleaming. Several decades later it’s running on one engine, the hull is rusted and encrusted with barnacles, the sea has turned ugly, there are menacing skies ahead and the captain is worried he’ll be refused fuel at the next port – yet still you can hear the clinking of champagne glasses and the whooping of merry-makers as the ship limps on.

It’s a sobering fact that the last year in which our income from exports exceeded our spending on imports was 1973. We were once frequently reminded that we were living beyond our means, but we tired of hearing it and tuned out. We prefer to party and hope.

Late last year the Budget deficit was revised upwards to more than $11 billion. To cover this, the government is borrowing the eye-watering sum of $300 million a week – money that we taxpayers will eventually have to pay back. In the meantime, Standard and Poor’s has pinned a “negative outlook” to our credit rating, which may mean higher interest rates on whatever we borrow.

And it’s not just the government that is living on borrowed money. New Zealanders have binged on private debt as well, which would be all very well if that money had gone into activity that generated the exports on which our economy ultimately depends. But it didn’t; instead it fuelled a property boom. A strange sense of entitlement – one that would have been completely alien to previous generations of New Zealanders – convinced us that we all deserved to live in McMansions, even if we had to mortgage ourselves up to the eyeballs to do it.

Our leaders knew what was happening but were happy for household debt to expand because it provided an illusion of economic growth. As the former BNZ chief economist Len Bayliss has pointed out, such policies went down well with the majority of voters because they saw themselves benefiting from rising house prices.

More recently, sluggish economic growth has been exacerbated by adverse events such as the Canterbury earthquake, finance company collapses (most notably the South Canterbury Finance failure, for which the taxpayer is picking up the tab), the Pike River tragedy and the leaky homes fiasco, with its potential multi-billion price tag.

The income gap with Australia is widening, despite the government’s avowed attention of catching up. Half a million New Zealanders now live across the Tasman because of the better economic opportunities there, and the number is likely to rise.

This disparity between New Zealand and countries like Australia is not just a matter of sterile economics; it has social consequences too. Three of my four children now live overseas, and my family is by no means exceptional. It’s said that among developed countries, only Ireland has lost a greater proportion of its population to other countries, and those losses include some of our best and brightest.

There is talk of rebalancing the economy – of reducing state spending and putting more resources into the export sector – but the government shows little sign of having the political courage to make the necessary tough decisions. Politicians, locked in to a three-year electoral cycle which militates against coherent long-term planning, have difficulty seeing beyond the next election.

The media don’t help either. Coverage of serious issues such as the state of the economy is relegated to the back pages or to TV current affairs programmes viewed by a tiny audience on Sunday mornings.

The country is assumed to have little stomach for debates about such vexatious issues as the recent report of the 2025 Task Force on how we might catch up with Australia. Better to send a reporter out in search of the city’s most exotic cocktail or best eggs benedict.

Banality and frippery too often take priority, reinforcing the impression that we are a nation of airheads, determined to keep carousing even as our stricken ship slips below the waves.

The New Zealand Institute, one of several organisations with a record of pointing out facts that New Zealanders don’t want to hear, recently produced a bleak scorecard for the nation in which we managed only a “C” overall and a dismal “D” in such crucial areas as household wealth, labour productivity and innovation (violent crime, too – but that’s another story).

NZI director Rick Boven was quoted as saying New Zealanders are an under-performing, complacent lot with an over-generous estimation of themselves. The “she’ll be right” attitude, which he traces back to the era when Britain bought all we could produce and guaranteed our prosperity, is ingrained in our culture.

Oh well. Perhaps the best we can hope for is that when the SS New Zealand eventually sinks, we’ll all be too drunk to notice.

5 comments:

Anonymous
said...

Sobering isnt it, and so true.....and when the ship is sinking the herd will still be screaming for "more resources" for DPB benefits and more holidays etc etc...and blaming business people.We are in a sorry state.

And I can see no reason why anyone should suppose that in the future the same motifs alreadyheard will not be sounding still……put to use by reasonable men to reasonable ends, or by madmen to nonsense and disaster”

In denial…Why Yes! One has to admit Mr. du Fresne you have a valid point but why have we reached this stage and how? Our forefathers certainly did not live beyond their income, or if they did there was no safety net at the cliff base (apologies for the mixed metaphor). They bounced if they were lucky, and crashed if they were not.

But then is that not the case with all civilizations? Have we too, become exhausted like Greece, Rome and the British Empire with our “measure of wealth”. Are things too easy for us, have we with our reliance upon a spirit of egalitarianism become convinced that the present is all we have to care about?

Has our socialistic state imbued us with the comforting assurance that the future is something that we need never worry about? The welfare state has become part of our very idealistic thoughts, our acceptance that all will be well in the end. Because the State says so.

The spirit of egalitarianism has become an additive drug; its very word from the French “egalitaire” conjures up from history the worst aspects of the French Revolution. More potently over the years in New Zealand, it has proved to be a disincentive in our ability to produce genius. I freely admit I have no evidence to support such a claim but the “Flattening Out” that egalitarianism engenders does not seem to produce the genius that is so lacking today.

Certainly this happening not only in New Zealand but in most Western Civilizations, one has to ask the question “Where are the great philosophers to range alongside Descartes, Pascal, Newton, Rousseau…..the great engineers of the 19th century Brunel, Stevenson, Watt etc.Does equality reduce our self confidence? Coupled with excessive laws and decrees that are imposed upon us all by a government that knows what is best for us?

We are living in a dream, from which we do not want to awake, yet a strange fact comes to light that our young people engaged on their overseas experience can be found working very hard, not concerned about the overall hardship of any employment they might undertake. Sometimes one has to admit in rather poor and primitive outmoded working conditions. To coin a phrase “They just get on with it to achieve their objective”.

Yet on return to the Motherland, they like us all; fall under the spell of those who continually demand more and more from employers in the form of wages and conditions, extra leave, environmental concerns and time off. Pass on the costs! “What exporters and the agricultural sector have rightly called “The cost plus mentality society”.

As Karl so rightly says there is little sign of ANY government, whatever party, taking the drastic action needed to right this imbalance. Not only the monetary one, but also in our attitude to life itself.

Perhaps John Adams was right, when he stated “That government is little better practiced now than three to four thousand years ago”.

Then the blame is ours and ours alone; as we elect our politicians (well half of them under our electoral system)!

what is needed is a union of SMES and then a revolt of the SMES --- "hey hey we won't pay".If the SMES collectively said to the government -- we won't pay the PAYE or GST this month or next the silly buggers might start taking some notice.

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